Critical infrastructure improvements, a growing portfolio of commercial ventures such as the TownCenter project in the city of Columbiana, and the potential to lure new industry attracted by low-cost energy, a highly skilled workforce and tax incentives, are helping to guide development in Columbiana County over the next five years.

That’s the consensus of development specialists throughout the region as they put private and public dollars to work to expand the county’s commercial and industrial footprint.

Over the last five years, Columbiana County has witnessed a surge in development buoyed by oil and gas exploration in the Utica shale. Utica East Ohio’s Kensington cryogenic plant in Hanover Township, for example, alone boasted a nearly $1 billion investment in the area.

And, more recently, energy giant Chesapeake Energy Corp. has started to renew existing oil and gas leasehold agreements with landowners, preserving the company’s position in the Utica shale and ensuring another round of bonus payments that should spur the local economy (See story page 40).

For investors willing to take a long-term view on their
resource portfolios, this could be the best of times, says U.S. Global
Investors CEO and Chief Investment Officer Frank Holmes. If you add patience to
your portfolio management strategy, holding discounted oil and gas and metals
mining stocks is one way to leverage the price equilibrium that will come when
China's growth hits the market. In this interview with The Energy Report,
Fund Manager Brian Hicks shares the names of the juniors farther up the food
chain that he is adding to the fund.

The Energy Report: Brian, in your last interview with The Energy Report in May, you
were watching the price of West Texas Intermediate crude as compared to the
average of the past six major bottoms. What is the chart telling you now?

Brian Hicks: It appeared in April and May that we might see a recovery
in crude oil prices. A lot of folks were excited about the rapid decline in the
rig count. However, U.S. production remained quite resilient, trending north of
9 million barrels per day (9 MMbbl/d). That caught a lot of people by
surprise—the fact that production had not rolled over—and led to a dip in crude
oil prices over the summer; they dropped below $40 a barrel ($40/bbl) briefly.

Approaching the end of the year, we
see some signs of production slowing. There is a lot of carnage in the energy
patch right now. A number of operators are going through their bank
redeterminations, are seeing their credit lines cut and are no longer able to
issue any high-yield debt, so that's started to crimp drilling budgets. You are
going to see even more of a drop-off in drilling activity, which could lay the
groundwork for a strong rebound in 2016.

TER: What indicators do you watch to determine where the larger
economy, and energy prices in particular, are going?

Frank Holmes: I focus on the global Purchasing Managers Index (PMI),
which is an alternative to gross domestic product and indicates commodity
demand. And I am watching China. Second-tier city real estate is still going
up, which bodes well for energy prices.

BH: We need emerging market currencies to stabilize. That would
be supportive for crude oil demand. Encouragingly, we have seen some
stabilization in the emerging market space recently. China is increasing
stimulative economic packages that could help revive demand, both in China and
around the world.

TER: The last time we chatted, you were moving to mid- and
larger-cap names, as you were seeing value in stocks that paid a dividend and
offered low volatility. Is that still the direction you're going?

BH: We have moved up the food chain. Given that companies are
finding it very difficult to get access to capital and the cost of capital has
gone up, we felt like it was better to invest in larger companies. We are
gravitating toward companies with strong balance sheets that can continue to
grow through the drill bit even in this low commodity price environment. That
would imply that they have very high-quality, low-cost acreage. We feel like
we've been able to identify some strong candidates in that regard.

BNK Petroleum
Inc. (BKX:TSX) is still a legacy holding. It's obviously a long-term
position with some of the projects it's undertaken in Europe. Those will be
slowed quite a bit given this price environment, but we like the acreage BNK
has in Oklahoma, and the crude oil growth we've seen. We feel like the company
is undervalued if you look at the reserves in the ground. At some point, that
value will be realized.

BH: Royal Dutch is moving into the execution phase on that
deal. Shell will to have to bring the two companies together, optimize the
organization, and look for synergies—areas where costs can be cut back. That
will be a developing story. The high dividend yield is the biggest reason to
own a company of Shell's size. That is what makes them attractive. This company
has been able to grow the dividends, in some cases, at very high, double-digit
rates over the last decade. I think a lot of folks who require income look to
those names.

TER: Let's talk about some new names that are performing well in
your portfolio.

BH: In our exploration and production (E&P) portfolio,
we're focusing on companies that can continue to grow production and expand
their reserve bases in this difficult environment. They have the balance sheets
to withstand the downturn, and the acreage to continue to drill. Obviously,
it's not an optimal time to be ramping up. These companies are generally
keeping drilling budgets within their cash flow. That is what we like to see.

The first company is Callon
Petroleum (CPE:NYSE). It's been around since the 1950s, but the company has
shifted its focus over the last five or six years from the Gulf of Mexico back
onshore and, specifically, to the Permian Basin in West Texas.

The Permian has been a legacy oil
producing basin for the U.S. for many decades. Horizontal drilling has
completely revived the Permian Basin, enabling production to increase to 2
MMbbl/d in 2015, up from about 800 Mbbl/d in 2007. Some 180–200 rigs are still
drilling; that's down from about 550 rigs, but relative to the other shale
plays, you're seeing the most activity in the Permian right now because
companies in the core of this area have been able to drill very prolific wells
that offer high economic rates of return.

Companies like Callon Petroleum can
deliver positive returns at oil prices as low as $40–42/bbl. We estimate this
company can generate internal rates of return of close to 28–30% at current strip
prices. That's very robust in this environment. You're seeing a number of
companies in the Permian continue to drill and maintain their activity levels,
even though we're in a depressed commodity environment.

TER: Callon seems to have a lot of partnerships in place. How
does that help investors manage risk?

A new Ohio-Michigan coalition of businesses, trade groups and labor unions is trying to show a federal agency that there is widespread public support for natural gas pipelines.

The group, called the Coalition for the Expansion of Pipeline Infrastructure, includes the Ohio Chamber of Commerce, the Ohio Manufacturers Association, the Ohio Chemistry and Technology Council, the Ohio State Grange and the Ohio Hotel and Lodging Association.

Its formation comes at a time when two major pipelines to carry natural gas from Ohio’s Utica Shale to Michigan are seeking approval from the Federal Energy Regulatory Commission.

Natural gas futures tumbled to the lowest since April 2012 as traders reacted to near-record inventories and mild weather that’s pushing back the start of winter demand for the heating fuel.

The eastern U.S. may be warmer than usual from Nov. 1 to Nov. 10, according to Commodity Weather Group. Stockpiles totaled 3.81 trillion cubic feet Oct. 16, 4.5 percent above the five-year average, according to a government report. Bank of America Merrill Lynch analysts lowered their year-end price target.

“The pressure is on here with the lack of weather and the storage situation,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said by phone. “It’s really gotten the attention of a lot of investors suddenly just how oversupplied we are.”

Natural gas for November delivery fell 22.4 cents, or 9.8 percent, to settle at $2.062 per million British thermal units on the New York Mercantile Exchange, the lowest since April 26, 2012. Futures touched $2.05 in the biggest intraday drop since February 2014. Volume was 90 percent above the 100-day average.

Wednesday, October 28, 2015

Environmental lawyers say they may have to craft new legal strategies to effectively challenge interstate pipeline construction decisions by the Federal Energy Regulatory Commission. Activists continue to accuse FERC of acting as a rubber stamp when it comes to approving pipeline projects. They argue the agency does not do an adequate environmental review that includes regional and indirect impacts associated with natural gas production, and the cumulative effect of thousands of miles of new pipelines. FERC denies this, repeatedly saying their environmental reviews are rigorous and any impacts from natural gas production are not the result of pipeline construction.

Either way, some environmental attorneys say the deck is stacked against them when challenging FERC’s decisions. Although the federal Natural Gas Act requires the agency to issue a decision on appeals within 30 days, FERC can extend the deadline indefinitely by issuing what is called a “tolling order.” In some recent cases, FERC issued its decision after the pipes were already in the ground with the gas flowing.

“[Tolling] orders are officially an “order granting rehearing for further consideration,” said Ryan Talbott, an attorney with the Allegheny Defense Project, “it’s totally Orwellian.”

Talbott’s organization has challenged FERC’s decisions on a number of natural gas infrastructure projects, including the Cove Point LNG export facility and the Columbia Gas Transmission’s Eastside Expansion project.

As debate roils over EPA regulations proposed this month limiting the release of the potent greenhouse gas methane during fracking operations, a new University of Vermont study funded by the National Science Foundation shows that abandoned oil and gas wells near fracking sites can be conduits for methane escape not currently being measured.

The study, to be published in Water Resources Research on October 20, demonstrates that fractures in surrounding rock produced by the hydraulic fracturing process are able to connect to preexisting, abandoned oil and gas wells, common in fracking areas, which can provide a pathway to the surface for methane.

A recent paper published in the Proceedings of the National Academy of Science showed that methane release measured at abandoned wells near fracking sites can be significant but did not investigate how the process occurs.

"The debate over the new EPA rules needs to take into account the system that fracking operations are frequently part of, which includes a network of abandoned wells that can effectively pipeline methane to the surface," said the new paper's lead author, James Montague, an environmental engineering doctoral student at the University of Vermont, who co-wrote the paper with George Pinder, professor of environmental engineering at the university.

The study focused on an area in New York State underlain by the Marcellus Shale formation, which had been fracked until a ban went into effect in the state in the summer of 2015.

Tuesday, October 27, 2015

The Ohio Department of Natural Resources has made available the latest weekly permitting update, which covers the week ending Saturday, October 24.

Like the previous few weeks, the latest report shows a lot of activity. 23 new permits were issued last week for horizontal drilling in Ohio's Utica shale. 14 of those 23 permits were for wells in Belmont County. Five of those 14 went to Ascent Resources, four were for Gulfport Energy, three for XTO Energy, and two for Rice Drilling. The remaining nine permits on the report were all issued to Antero Resources. Five of those were for Noble County and four for Monroe County.

Despite the total number of permits listed being 23, the cumulative total of permits issued increased by only 19. That brings the new total for permits to 2,066. 1,624 wells have been drilled, 1,026 are producing, and the Utica rig count is at 24.

October has been billed as a pivotal month in which indebted shale companies would see their credit lines cut, precipitating a faster consolidation in the industry that would sow the seeds of a rebound.

But banks appear to be taking a more lenient approach than expected. A new Jeffries report says that only $450 million in borrowing bases have been cut, across more than 20 companies. That amounts to just 2 percent of available credit lines, much lower than the 15 percent reduction expected by analysts. In other words, banks are allowing drillers to continue to borrow, which could delay the inevitable balancing needed in the market.

The possibility of a wave of bankruptcies could be put on hold, after banks have been “surprisingly gentle,” as Jeffries put it in their report.

That doesn’t necessarily mean that indebted shale companies can right the ship. It may just delay the adjustment for oil markets. “It looks generally to me like it’s sort of kick the can down the road approach that’s being taken at this point but that really just pushes the day of reckoning into sort of the first quarter of next year,” Dave Lesar, Halliburton Chairman and CEO, told investors on October 19 when reporting quarterly earnings.

Monday, October 26, 2015

"Given this potential for lower long term gas prices, we do not think it prudent to invest much money in wells whose all-in, after tax returns exceed our investment hurdle rates by only a relatively small amount," said David L. Porges, EQT's chairman, president, and CEO during an earnings call Thursday. "As a result, we are suspending drilling in those areas such as central Pennsylvania and our Upper Devonian play that are outside that core."

EQT owns acreage as far south as central West Virginia and as far east as northeastern Pennsylvania near Scranton, but the core of its drilling operations has focused on southwestern Pennsylvania in Greene, Washington, and Westmoreland counties. That core will become even more focused to the Utica, a shale layer below the Marcellus.

"There have been fewer than 10 wells drilled and completed in the deep Utica around our acreage, so it is still too early to say that the play will be economic," Porges said. "But the early results are certainly encouraging. Specifically, if the Utica does work, which for us means that the returns are better than the returns from the core Marcellus, we will certainly add significant resource potential to our inventory."

Porges wasn't specific about which Utica wells would be the focus of future natural gas drilling, saying that more specific guidance will emerge from the company in December.

Barring an oil price snapback, 2016 will be a year of restructurings, asset sales, and more layoffs. As Schlumberger CEO Paal Kibsgaard said on recent call with investors: “The likely recovery in our activity levels now seems to be a 2017 event.”

So what are laid off workers to think? Is there any hope of finding a new job in this environment?

There are some bright spots, says Steve Morse of Russell Reynolds Associates. The “downstream” or refining sector has been booming, benefitting from access to cheap oil. “It’s the opposite of the upstream,” says Morse. “We are helping clients in the downstream attract functional talent” that in recent years had been attracted to the more glamorous upstream companies.

And there’s also still plenty of opportunities for talented younger executives. “The companies we work with recall the 1980s” when oil prices collapsed and “the majors stopped hiring at the university level for eight years,” says Morse. And they are not going to repeat that hiring moratorium because they saw the longterm damage it did to their workforce. Two decades later they woke to the realization that their best executives were all approaching retirement age, with too few mid-career execs being groomed to replace them.

“What’s keeping us so busy now is succession planning,” says Morse. “Companies are careful to ensure that they have been training and promoting younger people.”

While opponents wait for the Obama administration’s carbon regulations to become official before suing to block them, state environmental agencies have been busy studying compliance options.

The Clean Power Plan, which requires states to reduce carbon dioxide emissions from power plants 32 percent by 2030, is intended to help slow climate change resulting from the burning of fossil fuels. The plan has been the target of legal challenges and legislative campaigns since it was proposed in 2014 and finalized in August.

At least 14 states, including many in coal country, are gearing up to pursue litigation once the rule is finally published in the Federal Register, the official record of government regulations, which will likely happen tomorrow. Although the administration argues the Clean Power Plan will create economic opportunity—one study by economists predicted it will create a quarter of a million jobs— and speed up the transition to a clean energy economy, the rule’s opponents have claimed it will kill jobs and hurt local economies.

Once the rule is published in the Federal Register, states and others challenging the rule will have 60 days to file lawsuits.

While the rule’s opponents wait, however, state environmental and utility departments have begun contemplating their options for meeting the policy’s mandates.

Thursday, October 22, 2015

Continued demand growth and falling production should help to end a protracted slump in energy prices in 2016, Hess CEO John Hess said Thursday.

"Nothing cures a low price like a low price. The seeds have been planted for a slow recovery in oil prices," he told CNBC's "Squawk Box." "It takes about two years for the market to rebalance, and we're in the first year of that two-year period."

Hess noted that global investment in exploration and production has fallen from $700 billion last year to $550 billion this year. With U.S. crude prices having slid to about $45 per barrel again, he said investment will sink even further in 2016.

Revenue for the quarter was $3.8 billion, down 39% compared to the third quarter of 2014. Compared to the prior quarter, revenue declined$182 million or 5%.

On a GAAP basis, net loss attributable to Baker Hughes for the third quarter was $159 million or $0.36 per diluted share.

Adjusted EBITDA (a non-GAAP measure) for the third quarter of 2015 was $522 million, an increase of $63 million or 14% sequentially, and a decrease of $666 million or 56% compared to the third quarter of 2014.

Adjusted net loss (a non-GAAP measure) for the third quarter of 2015 was $22 million or $0.05 per diluted share. Adjusted net loss for the third quarter excludes $191 million before-tax or $137 million after-tax ($0.31per diluted share) in adjustments. The adjustments include restructuring charges of $98 million before-tax or $70 million after-tax ($0.16 per diluted share) and $93 million before-tax or $67 million after-tax ($0.15per diluted share) for merger and other related costs.

Free cash flow (a non-GAAP measure) for the quarter was $348 million. Excluding restructuring payments of $56 million, free cash flow would have been $404 million for the quarter.

For the quarter, capital expenditures were $178 million, a decrease of$80 million or 31% sequentially, and down $247 million or 58% compared to the third quarter of 2014. Depreciation and amortization expense for the third quarter of 2015 was $432 million, relatively flat sequentially and down 5% compared to the prior year quarter.

Excluding merger-related costs, corporate costs were $26 million, compared to $42 million in the prior quarter and $57 million in the third quarter of 2014. The reduction in corporate costs is mainly a result of workforce reductions and lower discretionary spend.

Wednesday, October 21, 2015

Chesapeake Energy Corp. has been fined more than $2.1 million by the U.S. Department of Interior for repeatedly underreporting natural gas production volumes in Oklahoma.

Interior's Office of Natural Resources Revenue (ONRR) said Monday that Chesapeake had failed to comply with an October 2011 order that found "repeated, systemic errors" in monthly reporting of gas produced and sold from more than 100 leases on land owned by tribes and individual Native Americans. ONRR had ordered Chesapeake to restructure its monthly reporting system as part of a review to correct any unreported/misreported volumes.

"While the company assured ONRR it had corrected the reports, follow-up checks still found additional errors," said Interior's Paul A. Mussenden, deputy assistant secretary for natural resources revenue management. "Correct royalty reports, especially on American Indian leases, are essential for ONRR to ensure all royalties are paid, to provide reliable data used by ONRR's audit and compliance teams, and to provide accurate data to the American public."

Halliburton Co. cut another 2,000 jobs in the past month as the worst oil market slump in decades saps demand for work at the world’s largest provider of fracking services.

The Houston-based company said the first quarter of next year may represent the lowest point for its North American profit margin as customers start fresh with new spending budgets for 2016 and tap Halliburton’s pressure-pumping expertise to start new wells. The comments came after the company reported a third-quarter loss of $54 million.

"The pumping business in North American is clearly the most stressed segment of the market today, but it’s also the market we know the best," President Jeff Miller told analysts and investors Monday on a conference call. "This is the segment that we expect to rebound the most sharply."

Oil has swung between a bear and a bull market in North America this year as the drilling rig count slid. Explorers have cut more than $100 billion from global spending plans for the year after crude prices fell by more than half since June 2014.

Hess Corp., the oil and gas explorer that’s aggressively shed assets in recent years, is seeking buyers for its holdings in the Utica Shale basin, people with knowledge of the matter said.

The New York-based explorer is working with Goldman Sachs Group Inc. to solicit bids for the assets, which could fetch as much as $500 million, said the people, who asked not to be identified because the matter is private.

Goldman Sachs recently started sending teasers out to potential buyers, describing the assets up for grabs, one of the people said. Hess is selling its 50 percent stake in a joint venture in the region that it created in 2011 with Consol Energy Inc., the people said.

Hess has already sold 74,000 of the 95,000 acres it had acquired in the Utica shale, which doesn't include the 65,000 acre joint venture with Consol referenced in this article. But now it appears that Hess will leave the Utica shale behind altogether as soon as they can find a buyer.

The Ohio Department of Natural Resources has released the latest weekly update for permitting in the state's Utica shale formation.

Following the trend of the past few weeks, permitting activity numbers were up. 21 permits are listed on the report. Further following the trend of the past few weeks, many of the permits listed are ones that have been re-issued and already were listed on previous reports from the ODNR. In total there have been 72 permits listed on the last three weekly permitting updates, but the cumulative number of wells permitted has increased by only 30 over that time frame.

Of the 21 permits lasted on the latest report, 13 are for Belmont County. Three of the permits are in Carroll County, three in Monroe County, and the remaining two were issued for Noble County.

The cumulative total of wells permitted increased by just six since last week, rising to 2,047. The number of wells drilled now sits at 1,614, and the producing well count has risen to 1,022. The Utica rig count sits at 21.

This time last year, Ohio had 42 drilling rigs operating in the state targeting the Utica/Point Pleasant formation. Today, more than half of them have been idled or simply moved to other states. Falling commodity prices have caused significant turmoil in the oil and gas industry in Ohio and across the United States. The question foremost on many people’s minds would be “What does this mean for the Utica?” It’s a great question given the fact that this is still a relatively new play and producers haven’t really hit the development phase yet. The good news is, we are not alone.

Across the United States alone, more than a thousand rigs have been laid down since this time last year. The reason is simple, OPEC has decided to wage an economic war on the U.S. domestic oil and gas industry. Commodity prices for oil, natural gas and natural gas liquids have dropped considerably which is great for the consumer, but for those in the industry it has created some serious consternation.

It is true that less money is being spent on the exploration and development of natural gas and oil this year which is why we have seen a slowdown of drilling in eastern Ohio. It truly bothers me when I drive Interstates 70 or 77 and I don’t see a rig or a flare in the distance, because that means energy and jobs aren’t being sustained. When there is a temporary slowdown, often you’ll see a change in focus to other sectors of the industry to help improve the ones that are in distress. Right now the change in focus we are seeing is on pipeline projects.

The Mahoning County Democratic Party today announced that it has endorsed a "No" vote on the Youngstown city charter amendment banning fracking. The vote was unanimous.

“The members of the executive committee were unanimous in opposition to amending the charter banning fracking. The group knows full well this is a total waste of the taxpayers' precious funds,” chairman David Betras stated after the vote. He urged all city residents to vote “no” on this "job-killing amendment."

During a lengthy conference call Friday morning, Kibsgaard said the fourth quarter now "looks challenging and visibility had actually dropped in the past month or two...We also expect rig activity in North America land to be down in the fourth quarter because of the financial stress on many of our customers there, and we expect very limited year-end sales of product, software and multiclient…”

The first quarter actually looks like it’s going to be worse than the last three months of this year.

Schlumberger's macro view "has not changed in terms of a tightening supply and demand balance and an expected improvement in oil prices," but "we have to factor in that the likely recovery in our activity levels now seems to be a 2017 event."

Prices are down and have been for a while, drillers have dramatically slowed the rate at which they're drilling in Ohio and many energy companies invested in the Utica Shale have cut costs and laid off employees.

But Ohio still has a great chance to not only continue to cash in on the Utica shale's natural gas, but also to capitalize on its ethane by building an ethylene processing and plastics industry around the shale play, says a national expert on the petrochemical industry.

Tom Gellrich, a noted expert on ethane and the related chemical industry gave that upbeat message to an audience of about 150 people at the Utica III conference, held by the Canton Regional Chamber of Commerce on Oct. 13 at Kent State University's Stark County campus.

Gellrich is one of the best experts to hear from when it comes to the ramifications of Ohio's ethane, said David Kaminski, vice president for public policy and energy for the Canton Chamber and the man most responsible for its Utica summits.

Tuesday, October 20, 2015

Any displaced coal miners or power plant workers who worked in Ohio may be eligible for retraining to work in the Marcellus and Utica shale industry, thanks to a $ 2 million grant from the Obama administration.

Even as the administration's Clean Power Plan, Mercury and Air Toxics Standards, and Stream Protection Rule continue threatening coal industry jobs, the $ 2 million grant to the Ohio Department of Job and Family Services will allow out-of-work coal miners to receive new training to work in the oil and natural gas industry.

The cumulative $ 14.5 million worth of grants totals what the administration calls a "down payment" on a proposed $ 10 billion stimulus plan for areas impacted by coal industry related job losses. The funding is part of the administration's Partnership for Opportunity and Workforce and Economic Revitalization Initiative.

As he stood beneath a 15-ton crane on the manufacturing floor of BOC Water Hydraulics, it became obvious why Republican presidential candidate Sen. Marco Rubio had chosen Salem to unveil his energy policy.

The future of American energy, he said, lies with oil and natural gas, not solar and wind power. And areas like Columbiana County where shale drilling is happening – coupled with companies like BOC manufacturing parts for those projects – is where innovation and economic boosts will come from, he said.

Before a standing-room-only crowd of nearly 250, Rubio laid out the three priorities for his energy policy: minimize bureaucracy, maximize private innovation and optimize the available energy resources.

“The $100 billion of natural gas and the $550 billion of oil beneath our feet are doing more to help the people of Ohio and doing no good pent up in shale rock,” Rubio said. “Yet Barack Obama and Hillary Clinton are arguing that it’s more important for us to stabilize and subsidize wind turbines and solar panels than to expand our extraordinary reserves.”

The same research team that appealed to anti-fracking activists Josh Fox, Mark Ruffalo and Yoko Ono after their work was rejected by the National Institutes of Health for not being “good enough to be funded” has just published a new study proclaiming that exposure to endocrine disrupting chemicals (EDCs) in fracking fluid causes low sperm count in mice.

Before we get into the numerous flaws (and absurdities) of the study, it’s worth noting that the supervising researcher, Susan Nagel, has not exactly kept her anti-fracking bias under the radar. In addition to tweeting at the most prominent anti-fracking celebrities asking them to fund her work, she also recently appeared alongside Sandra Steingraber, co-founder of New Yorkers Against Fracking (who, according to that group, “is a central voice in the fight against fracking”) for an interview proclaiming the “dangers” of fracking. She also publicly endorsedGasland in a talk entitled “What the Frack?” in which she called Josh Fox’s completely debunked films“educational” because they contain “a lot of good information” and are only “a little sensational.”

While the researchers were not able to secure funding from the National Institutes of Health, they did receive a grant from the Passport Foundation, which also provides funding to anti-fracking groups such as the NRDC, EarthJustice, and the Environmental Working Group. As EID pointed out in a recent report, the Passport Foundation is part of the Health and Environmental Funders Network (HEFN), which was also behind number of “reports” (many of which were written and peer reviewed by anti-fracking activists) that were used to justify the ban on fracking in New York.

With that backstory, it’s not surprising that the researchers present the most unlikely scenario in order to suggest the worst possible health outcomes. Here are a few facts to consider:

Fact #1: Researchers manufactured a concoction of far more chemicals than are ever used during fracking, and at far higher doses, and then declared harm

The researchers created a cocktail of 24 chemicals that, if consumed in very large doses, are known to cause health problems. They then injected this cocktail – in very large doses – into the water of pregnant mice and declared that it caused the baby male mice to have low sperm counts. No wonder the National Institutes of Health wouldn’t fund this study!

Speaking to the very high level of chemicals the mice were given, the lead researcher, Christopher Kassotis perhaps put it best when he admitted, it’s “unlikely people would ever be exposed to doses quite as high.”

The researchers say they exposed the mice to doses as high as 300 and 3000 g/kg/d yet, at the end of the study, they admit that if these chemicals were ever to be exposed to humans (more on that later), they would be at far lower doses:

“Considering these concentrations, it is likely that environmentallyrealistic human exposure would be in the range of 3–30 _g/kg _ d, experimental doses assessed in this study, suggesting that we have appropriately captured environmentally relevant oral exposure levels for wildlife and/or humans living in dense-drilling regions.” (p. 9; emphasis added)

“Nagel acknowledged that the highest of the four concentrations her team added to the drinking water of pregnant lab mice — a level that mimicked the concentrations found in fracking wastewater from some Colorado drilling sites — was unlikely to represent realistic human exposures.”

Even though they admit to subjecting the mice to extreme doses, far higher than what would ever plausible, they make the head-scratching claim that because they also subjected them to doses in the range of 3-30 g/kg/d that means they used doses that were at appropriate levels!

This is also the same research team that has long pushed the false claim that hydraulic fracturing uses more than 1,000 chemicals, but a recent Environmental Protection Agency (EPA)report, which looks at more than 38,000 disclosures to the FracFocus website, completelydebunks them on that point, noting that the “median number of additive ingredients per disclosure for the entire dataset was 14.”

Further it’s well known that fracking fluid is typically 99.5 percent water and sand, while the remaining 0.5 percent is made up of additives. According to that same EPA report, the maximum concentration of all additives was less than one percent and the median maximum fracking fluid concentration was 0.43 percent by mass.

In other words, the researchers exposed mice to 24 chemicals even though the median number is 14 for any given fracking operation – and they did so at extremely high concentrations even though they admit that wastewater would never have levels even remotely that high.

Fact #2: Researchers have admitted they have no evidence to claim EDCs from fracking are contaminating water

This latest paper follows the trajectory of a previous study by the same research team. In that paper, they claimed to have located EDCs from fracking at a number of sites in Garfield, Colorado. They have since admitted that they had no scientific evidence to make that link. As Nagel stated in an October 8 NPR interview,

“We did not prove that those spills were the cause of the increased endocrine disrupting activity in the water.”

The Colorado Department of Public Health and Environment (CDPHE) agreed. In a statement to the media, its Water Quality Control Division listed a series of criticisms against the paper, including the fact that

“There are numerous (thousands?) septic systems in Garfield County. We don’t know how this may influence endocrine-disrupting chemicals (EDCs) concentrations in groundwater.”

CDPHE also noted that the researchers’ geological assumptions were “not factually or scientifically valid” and “there is no indication in the study that any of the sample sites are currently used for drinking water.” The medical publication Clinical Advisor further noted “a lack of direct identification of fracking chemicals in the tested water.”

EDCs can be naturally occurring or man-made, and can come from numerous sources. As the National Institute of Environmental Health Sciences puts it:

“Endocrine disruptors are naturally occurring compounds or man-made substances that may mimic or interfere with the function of hormones in the body […]These chemicals are found in many of the everyday products we use, including some plastic bottles and containers, liners of metal food cans, detergents, flame retardants, food, toys, cosmetics, and pesticides.” (emphasis added)

Further, several chemicals used in agricultural activities could contain EDCs, as even the NRDC has pointed out before:

“Chemicals suspected of acting as endocrine disruptors are found in insecticides, herbicides, fumigants and fungicides that are used in agriculture as well as in the home.”

Interestingly, the authors not only agreed, but actually stated that the EDCs they examined could be coming from sources other than fracking. From their previous report:

“Both naturally occurring chemicals and synthetic chemicals from other sources could contribute to the activity observed in the water samples collected in this study” (p. 16, emphasis added).

The researchers went on to explain that “agricultural and animal care operations could potentially contribute to the measured activity in Garfield County.”

But having scientific evidence doesn’t seem to be a priority. When asked about what her work means for public health in her recent interview with NPR, Nagel answered,

“Sure, so what know from occupational exposure and from a very large literature on endocrine disrupting chemicals, what we can expect although we haven’t done the studies yet to show: what we can expect are really all kinds of negative health outcomes related to fertility, related to the ability to get pregnant, to stay pregnant;certainly reduced sperm count shave been associated with exposure both in people and in the lab. Also, other effects that we expect are developmental effects. So when unborn children are exposed, they are a particularly sensitive population and even young children and in that case the brain is exquisitely sensitive to endocrine disrupting chemicals and so what we have seen over and over again is that exposure changes behavior, you know, increases activity and all sorts of other behaviors that are not normal.” (emphasis added)

The researchers’ conclusion rests on the assumption that spills from oil and gas development are prevalent and causing widespread water contamination, exposing families to loads of EDCs. But EPA’s five year study of fracking and groundwater – the most thorough study to date on fracking – came to the opposite conclusion. As the report explains,

“[H]ydraulic fracturing activities have not led to widespread, systemic impacts to drinking water resources.”

EPA also looked as spills and found the number of cases of groundwater being impacted by development activities to be “small”:

“Of the potential mechanisms identified in this report, we found specific instances where one or more mechanisms led to impacts on drinking water resources, including contamination of drinking water wells. The number of identified cases, however, was small compared to the number of hydraulically fractured wells.” (ES-6, emphasis added)

Fact #4: Researchers’ own data show that that EDCs exists in just about everything under our kitchen sinks – likely at higher levels of exposure than in fracking fluids

EDCs are found in just about everything we use on a day to day basis. As the researchers own data show, EDCs are located in dyes, perfumes, plastics, personal care products, detergents, cleaning agents, and the list goes on:

It’s also worth noting that six of these chemicals are also surfactants – chemicals what were recently found to be “no more toxic than common household substances” by a University of Colorado-Boulder report.

Not only are these chemicals in just about everything we use, they are also located in nature. The chart also clearly shows that at least ten of the chemicals that were tested are naturally occurring, which is important considering that numerous studies have found naturally occurring chemicals in water wells before oil and gas development ever occurred. The most recent one comes from a report by researchers at Syracuse University, which looked at 21,000 baseline samples in Pennsylvania and found,

“no broad changes in variability of chemical quality in this large dataset to suggest any unusual salinization caused by possible release of produced waters from oil and gas operations, even after thousands of gas wells have been drilled among tens of thousands of domestic wells within the two areas studied.”

The bottom line is that in order for a chemical to be of concern for toxicity there needs to be a concentration high enough to cause harm and a pathway for contamination. With chemicals making up less than percent of the fracking fluid, and even EPA stating that there’s no credible threat to drinking water from fracking, it’s more likely that exposure to these chemicals is greater in your kitchen or garage.